Living Better While Spending Less – Secrets of America's Upper Class

What Price Education?

I’m usually very circumspect with my posts, but this one’s coming off the (French) cuff, and if you detect more than a little outrage, you’re right.

In the last day or so, there have been several articles online and in print discussing college graduates defaulting on their student loans. The most prominent Op-Ed piece appeared in Sunday’s New York Times.

In The Old Money Book, I encourage my readers to do the right thing, beyond what is legal. I admonish everyone to do what’s ethically and morally correct. Set an example.

So you would expect me to strongly suggest that walking away from an obligation like a student loan is the wrong thing to do.

Well, honestly, at this point in time, I can’t say that it is. Here’s why:

An educated populace is essential for a healthy democracy. So having a substantial segment of the population who can read, write, think, analyze, refute, debate, consider, imagine, and create is critical for our society. And I’m speaking primarily as an American, but also as a global citizen.

Not everybody is going to be a college graduate, but the study of history, philosophy, science, government, literature, and the arts really makes our world go ’round. It makes progress possible. So we need people enrolling in and graduating from institutions of higher learning, from community colleges to the Ivy League.

In a just society, if you take care of billion-dollar corporations with government subsidies, tax loopholes, and bailouts, then you take care of struggling students who are trying to make a better life for themselves. We bailed out the banks in the last financial crisis, and guess what, we’re having another financial crisis right now: it’s student loan debt combined with a stagnant economy. The big difference is that struggling students, living at home with their parents and working at Starbucks, can’t afford lobbyists and soft-money campaign contributions to purchase influence with lawmakers in Washington, DC. Yes, revisions have been made to student loan payment schedules, but it’s not enough.

This is the generation we’re handing our future to. We can’t ask young people to forge a dynamic future for us with a financial piano on their backs. We can’t ask them to not be educated. I don’t want idiots running things when I’m ready to kick back and enjoy some leisure time. And I don’t want entrenched bureaucrats or a ruling elite running things, either, because we didn’t have an educated middle class to kick them out of their positions of power when they’d overstayed their welcome in our democracy.

A boycott is a tremendously effective political tool. It has been proven over and over again that when you mess with someone’s money, you get their attention. A boycott–and that’s what not repaying a student loan can be–is a way of making your voice heard. Of course every major mainstream media outlet is going to say it’s a bad idea. It’s their boogey-man tactic. “If you default, the sky will fall!” No it won’t. What will happen is you (the government and big banks) won’t get your money. And if college graduates do this in mass, good luck on collecting, and good luck on enforcing some sort of social stigma or scarlet letter on several million college graduates who’ve simply had enough.

To be sure, there can be challenges in having the US Department of Education on your tail for years to come. There can be challenges in having a $200,000 loan to pay back the day you graduate, too, when salaries and job opportunities are in the toilet and the costs of food and housing are climbing at an alarming rate. And don’t get me started on income inequality, and the costly white collar crime that goes unpunished.

And remember, too, that governments don’t last forever. Ten years from now, do you think the United States government will exists in the form it does now? Something to consider.

The choices for college graduates with student loans to repay are tough, but clear. Pay it all back over however much time, pay back some of it, or stop making payments and deal with the consequences…and the freedom.

But what can we older, more established citizens do to help? Never one to simply focus on the problem, I’ve got some ideas.

1. Pay a graduate’s debt off. Easy as that. There are roughly 5.2 million millionaires in the United States. 69% of 2013 college graduates matriculated with, on average, $25,000 of student loan debt. If you’re only worth a million bucks, a twenty five grand hit could be disconcerting. But not a five grand hit. You’ll spend that on a vacation. So, go ahead, make someone’s day: pay part of their debt off. If you’ve got five million, you need to start writing some checks and changing some lives, immediately. Put a cap on the trust funds for the children and grandchildren and make it rain. My experience has been that this is best done in a personal, private way, but if you’re feeling breezy, use that darned worldwide web.

2. Help a student get into college and through college. Application fees to universities and colleges can be an obstacle for even the most academically gifted students. Write a check. Agree to sponsor a student with a couple of hundred dollars a month in spending money while they’re in school. If they make the grades, you make the deposits. That’s the deal. They may have grants and scholarships for tuition and fees, but they still have to eat and buy clothes. Be their angel.

3. Demand companies do the same. If you’re shopping somewhere, talk to the owner or manager. Suggest that, if they want your continued business and support, then they should help some students pay off some debt. Be nice, but be firm. If ten people walk into a store in a week and communicate this, the money will appear and deserving students will get some instant relief.

Here’s a final thought: when a tsunami hits Japan, we give money instantly and generously. Same thing with the earthquake in Haiti. People needed help, we gave. That’s the way we are. I don’t think it would be an exaggeration to call student loan debt a national emergency.

So let’s act like it is. Let’s give.

And if you’re a recent college graduate and you decide to walk away from your student loan obligations, you have my empathy, my blessings, and my support.

As a fairly recent graduate, I am familiar with many people in tight financial circumstances due to student loans. Fortunately, the state of Louisiana gives 4 years of free tuition to basically all Louisiana grads who earn acceptance in to a state university. This program, while flawed, has definitely given great educational opportunity to some who, otherwise, would have never had a chance of going to college. In my state, grad school debt has become the culprit of my friends financial woes. While I agree with most of your points above, I do believe that students must begin considering the “return on investment” of their education. If a masters progarm will cost $50k but it will only allow you to earn $5k more per year, then maybe thats not a feasible path. Universities must also do more on the career planning side, so that students can know whether a certain program is worth the tuition. I would also like to emphasize a point that you made above. Businesses should absolutely encourage their employees to further their educations if it will help improve the quality of their business. My wife is a teacher, and her school will pay half of the tuition for any of their employees who want to earn masters or phds. Some employers (mostly hospitals in need of nurses) will actually assume a new employees past student loans if they agree to work for a certain number of years at that company. Our government should look in to ways to encourage employers to implement policies similar to these.

Anyway thanks for the blog and the book. Ive followed for a while, but only felt compelled to comment today. For the record, i’m an extremely conservative (more libertarian) Catholic white male, and I believe that through forums like this blog, people of all backgrounds and political persuasions can come together and at least figure out what we agree on and work on solutions to the worlds problems from there.

Thank you for the comment. I appreciate first-hand insights into the topics covered here, and especially your closing remarks about all of us coming together to work things out. I hope the book and the blog continue to be informative. – BGT